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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






2. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






3. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






4. All firms maximize profit by producing where MR = MC






5. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






6. Ed = 8 - infinite change in demand to price change






7. Entry (or exit) of firms does not shift the cost curves of firms in the industry






8. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






9. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






10. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






11. MUx / Px = MUy/Py or MUx/MUy = Px/Py






12. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






13. Ed = (%dQd)/(%dP). Ignore negative sign






14. A good for which higher income decreases demand






15. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






16. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






17. AFC = TFC/Q






18. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






19. Ed < 1






20. Ei > 1






21. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






22. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






23. The most desirable alternative given up as the result of a decision






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






25. The practice of selling essentially the same good to different groups of consumers at different prices






26. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






27. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






28. Entry of new firms shifts the cost curves for all firms upward






29. The imbalance between limited productive resources and unlimited human wants






30. The additional benefit received from the consumption of the next unit of a good or service






31. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






32. Models where firms are competitive rivals seeking to gain at the expense of their rivals






33. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






34. The marginal utility from consumption of more and more of that item falls over time






35. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






36. A firm that has market power in the factor market (a wage-setter)






37. 0 < Ei < 1






38. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






39. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






41. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






42. Total product divided by labor employed. APL = TPL/L






43. Occurs when LRAC is constant over a variety of plant sizes






44. The sum of consumer surplus and producer surplus






45. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






46. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






47. Exists if a producer can produce a good at lower opportunity cost than all other producers






48. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






49. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






50. Ei = (%dQd good X)/(%d Income)







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